Why are developers aggressively pricing off-plan properties?
Answering the questions on how Dubai’s off-plan market can
balance between luxury and affordability.
In Dubai’s property market where demand continues to soar while supply “runs dry”, developers and investors are continually adapting to shifting trends to meet consumer demands.
According to Dubai Land Department’s data, the secondary market currently dominates the real estate landscape, constituting 63% of the total value of sales transactions, while off-plan properties make up 37% in this past Q3 of 2023.
The question then arises: Why are developers pricing their off-plan properties more aggressively than ever in Dubai?
One possible answer lies in the changing dynamics of the property market. As the demand for luxury properties continues to soar, property developers are revising their strategies to meet the evolving needs of investors and homebuyers. They are now focusing on creating properties that offer quality and status, which by default drives prices higher than market expectations.
Developers are noticing the demand being higher for properties in Dubai, indicating there are more people in the market and more liquidity. With higher liquidity in the market, developers can ask for more money upfront. As more people are able to afford to pay upfront, developers are pricing their properties more aggressively. Sellers and developers are now reacting to the launches that sell out within minutes such as Palm Jebel Ali and DIFC Living for example. These new launches play as an example of how buyers aren’t scared away by these heavier price tags, 20-30% down payments and the timeframe that those off-plan projects come with, averaging two to four years at minimum which is much longer than renovating an ready to move in property.
An overflow of capital?
As Dubai’s property market continues to evolve and bring state-of-the-art developments, buyers are looking to capitalise on what could be called an overflow of capital currently present in the city.
A great example of that comes when we compare prices from 2021 with those from 2023, we see an increase of 25%. Where the average price per square foot in 2021 stood at AED 1,539, it has now risen to AED 1,937 in 2023.
One of the premium communities to note would be Mohammed Bin Rashid City, District One, which saw an average price per square foot of AED 1,297 in 2021 and two years later, we currently stand at AED 1,787, a 38% rise.
However, according to one of Dubai’s largest brokerages, first-party data, 64% of the properties purchased in Q3 were under the AED 3 million mark, signaling that the majority of the buyers in the market are still going for more affordable properties. Whilst the market seems to be an owners/developer’s market, no matter the price, buyers are ready to pay for Dubai’s property market, especially when considering the multiple new developments that are selling out in minutes.
“Developers are recognising the increasing demand and liquidity in the market, which allows them to price their properties more aggressively. Despite rising rates, international investors are flocking to Dubai, indicating a promising future for developers. The key now is to ensure that Dubai remains a market where luxury and accessibility coexist.”
